Reducing the US deficit is likely to reduce both stock prices and corporate profits.
Brett Garbut CFS,CLTC’s Post
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Dividend-paying and non-paying stocks have performed differently over the last 20 years, but how will they fare in a higher interest rate environment? Read the latest Minds on the Markets commentary from Kevin Flanagan & Jeff Weniger, CFA for their take. Read & subscribe:
The Confused Stock Market Will Not Be Confused about Profitless Stocks
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📈🤨 Are Stock Markets in for a Rollercoaster Ride? 🎢 Late last month, the stock market went from calm to excitement as the debt ceiling situation took center stage. Reports of parties inching closer to an agreement sent stocks soaring, but is it too good to be true? Our latest article delves deep into the situation: 🔍 Examining the gap between Biden and House Republicans 📜 Understanding the agreed-upon clawback of COVID stimulus 💼 The challenging road ahead with discretionary spending cuts Read the full analysis here: https://lnkd.in/gBMR9qGH #StockMarket #DebtCeiling #FinancialNews #PoliticalEconomy #MarketTrends 📊🏛️💰📰
Good News on Inflation Overshadowed by Debt Ceiling Concerns | Realty ONE Group
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Portfolio Manager | Exit and Retirement Planning Specialist | Risk Adjusted Returns | Tax Optimization | Effective Estate Preservation and Legacy Planning | Family Oriented | Big Picture Thinking
If you're concerned about what happens to stock markets if there's a US Government Shutdown, check out this article. The message is that a shutdown doesn't always mean negative returns. In fact, there's been more times returns have been positive during a shutdown. Another reminder to not get panicked about short term noise!
Staying the course during a government shutdown - advisors.vanguard.com
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Treasury Bills Now Yield 4x More Than S&P 500 Dividend - A Dot-Com Bubble Echo? The spread between US Treasury Bills and the S&P 500 dividend yield is flashing a warning sign, reaching its highest level since the Dot-Com bubble. As the chart shows, Treasury Bills are currently yielding 4 TIMES more than the S&P 500 payout, a situation seen only one time in over 100 years. Even during the 2008 financial crisis, this metric only peaked around 3x. This widening gap suggests a potential shift in investor sentiment. With interest rate cuts seemingly off the table, bond yields are likely to climb further. This trend could keep Treasury Bill rates elevated and potentially push this ratio to its Dot-Com bubble peak. The historical spread between Treasury Bills and the S&P 500 dividend yield is worth watching closely. It could signal a changing investment landscape, with implications for asset allocation strategies. What are your thoughts on the widening spread between Treasury Bills and the S&P 500 dividend? #treasurybills #sp500 #investing #dotcombubble #interestrates #financialcrisis
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Donald Moine, Ph.D., Industrial and Organizational Psychologist specializing in Sales, Marketing, Financial Services and Business Funding. Executive Coach. International Consultant. Speaker. Author.
Billionaire investor Bill Gross warns of more pain for bond investors with fixed-income on track for unprecedented 3-year slump. Billionaire investor and bond expert explains why 10-year Treasury bond yields may not drop below 4%, even if the Fed cut rates next year: 1.) A ballooning government deficit — amounting to about $1.5 trillion in the first 11 months of the fiscal year – is propelling consumer spending and making it difficult to tame inflation. 2.) About 30% of the more than $30 trillion Treasuries outstanding will mature in the next 16 months, he said. On top of that, he said, the Fed is selling about $1 trillion of its bond holdings. “Who’s going to buy them at existing yield levels?” he asked. In his view, “the 10 year Treasury is already priced for a 2% inflationary world.” Historically, he said, 10-year notes yield 1.35 percentage points more than the fed funds rate. Even if the policy rate drops to 2.5%, that puts 10-year yields close to 4% “under the best of possible scenarios.” For more insights into the thinking of this Bond King: https://lnkd.in/gYkD9B8W Food for thought: Are you prepared for a higher interest rate world where everything we buy on credit, houses, cars, everything we finance is considerably more expensive? Dr. Donald Moine #InterestRates #Inflation #BePrepared #DrDonaldMoine
Billionaire investor Bill Gross warns of more pain for bond investors with fixed-income on track for unprecedented 3-year slump
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US STOCKS - IT’S NOT WHAT YOU READ THAT IS IMPORTANT ! “…The belief that one’s own view of reality is the only reality is the most dangerous of all delusions…” Paul Watzlawick The usual narrative you are told by independent financial advisors is that the US equity market continues to rise because of fabulous innovation, and population growth, and ‘time out’ of it is is expensive. But what is the real story ? Well, it is true that if the population grows, usually the economy grows, and earnings will grow too. And the US population continues to expand, but at smaller percentages. And it’s also true that innovation in the US allows US companies eg Amazon & Apple etc to secure a significant part of international markets and increase their earnings that way, too. So a good deal of what is shared, is right. But what is NOT fully appreciated is the impact of leverage on the US economy via increases of US government debt, and how this has also fuelled the SP500 stock market miracle. The chart below shows LOG SP500 vs US DEBT/GDP as a %. It’s only headed one way ! Reagonomics was not a miracle, but just an increase in US government debt as a percentage of GDP. Bidenomics is the SAME. Put simply, US government deficits EQUALS private sector surpluses, which benefit equity owners, usually the rich ! For example, US government expenditure to support Ukraine is simply debt to buy US weapons and ship them abroad. The beneficiaries are only US defence companies. But is there a point when the DEBT/GDP % is itself a destabilising input ? This question is the topic of future updates. But for now, we leave the chart whoch illustrates the historic power of US government debt increases on the SP500. 'WALL-ST-CHAT' - Helping you untangle financial markets - A publication from the METRICA Group.
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Stan Druckenmiller has publicly criticized the US Treasury for covering the budget deficit by issuing T-bills versus issuing Coupon-bearing Treasuries. Stan definitely has a point. Spreading the issuance over the longer maturities would have been a no-brainer way to: 1) reduce interest cost of servicing our debt (given the deeply inverted US yield curve) 2) reduce the risk of funding - over a longer horizon The only reason IMHO opinion why the US Treasury still decided NOT to pursue this obvious route is to preserve the liquidity in the system. When the US Treasury issues T-bills it does absorb cash from the banks, but it does barely reduce liquidity, because T-bills are viewed as a cash equivalent and often used in different money market operations. Coupon-bearing Treasuries are far less liquid and do drain down liquidity far more. Therefore, the US Treasury (in agreement with the Fed) chose to preserve the Short-term liquidity over the cheaper funding. Obviously, this liquidity has stabilized markets and helped the economy through the wealth effect. S&P500 is making new highs for the year despite the admittedly slow(ing) economy! That begs at least a couple of questions: 1) Do they still view inflation as "transitory" therefore, hoping to cut FFR very soon 2) Do they plan to refinance the next wave of debt issuance at LOWER rates soon (either Coupon-bearing Treasuries or, T-bills again!). I.e. are they really smart market timers (them being a key market driver)? I am ignoring other effects (another fiscal burst and resulting rundown of the TGA last 3-4 weeks) and stepping up repos. Comments pls? #rates #thefed #ustreasury #interestrates #nvidia #soros #druck #druckenmiller
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📉 𝗧𝗵𝗲 𝗨𝗦 𝗧𝗿𝗲𝗮𝘀𝘂𝗿𝘆'𝘀 𝗕𝗼𝗿𝗿𝗼𝘄𝗶𝗻𝗴 𝗦𝗵𝗶𝗳𝘁: 𝗔 𝗗𝗲𝗲𝗽𝗲𝗿 𝗗𝗶𝘃𝗲 📈 The 𝗨𝗦 𝗧𝗿𝗲𝗮𝘀𝘂𝗿𝘆 recently made waves in the financial world with a surprising announcement. They've decided to borrow less money than initially forecasted for this quarter, slashing their estimate by a whopping $70 billion. However, this isn't all rosy. The Treasury has also hinted at a significant borrowing spike in the upcoming quarter, with an eye-popping forecast of $816 billion. 🚀 So, what's the ripple effect? For bond investors, this is crucial intel. The borrowing level directly correlates with the volume of US government bonds entering the market. More borrowing equates to more bonds. And as the bond issuance rises, their prices tend to drop, pushing their yields - the annual return expected by investors - upwards. 📊 #𝗕𝗶𝗴𝗴𝗲𝗿𝗣𝗶𝗰𝘁𝘂𝗿𝗲 🌍: The US government's budget deficit is ballooning, thanks to a mix of tax cuts, rising defense costs, and economic stimulus measures. As the Treasury sells bonds to bridge this deficit, the US's already staggering debt continues to grow. This mounting debt, coupled with soaring interest rates, is exacerbating the budget deficit, creating a concerning cycle of increasing bonds, rising interest dues, and a worsening deficit. #𝗠𝗮𝗿𝗸𝗲𝘁𝗜𝗺𝗽𝗮𝗰𝘁 📉: Treasury bond prices have been hammered by these high interest rates, leading them towards a third consecutive year of losses. And with the Federal Reserve maintaining rates at a 22-year peak, this trend shows no signs of reversing. #USTreasury #BorrowingShift #BondMarket #GovernmentSpending #BudgetDeficit #EconomicStimulus Read More: https://rfr.bz/l6u939t
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President CWS Capital Partners-Specializing in Acquisition, Development, & Management $7B Apartment Communities | Author | Top 50 Financial Blogger | Skilled Tennis Player & Fan | The Eleven | TheTenniSphere Founder |
The 2-Year US Treasury yield is up to 5.088%, the highest in 16 years. 1 year ago, the yield was at 3.9620%, and two years ago, it was at 0.23%. Just a few weeks back, I was taking a peak at the 2Y Peak! https://lnkd.in/gBF88HMn
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Treasury yields remain a key focus for investors as the 10-year Treasury yield pushed past 5% for the first time since 2007. As of 9:32 a.m. ET, the 10-year is currently trading 4.97%.
A Rise to Five; A Lack of Leadership - October 23, 2023
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